Sunday, September 9, 2012

Woodward "Corners" Obama, Only To Crash Into The Debt Ceiling

Top headline in Washington Post today reads, "A President Cornered," an extract from Bob Woodward's book due out Tuesday, _The Price of Politics_, from which leaks of various sorts have already been floating around. Much as in a story in WaPo earlier this year, the focus seems to be that Obama blew the negotiations with Boehner and Congressional Republicans over last year's raising of the debt ceiling (although according to that report, the crucial blow came from the the "Gang of Six" who held a badly timed press conference, with Obama publicly praising them). In this account, Woodward quotes Boehner that Obama was "moaning and groaning" at one crucial point, and new "hero" emerges, Harry Reid's Chief of Staff, David Krone,who gets much praise for lecturing Obama to his face about not having a "Plan B" besides his demand that there not be another round of raising the debt ceiling prior to the election, with Krone apparently responsible for the Plan A that did involve such a second round increase before the election. In the end,Obama got his way on not having such second round, although we do face the idiotic "fiscal cliff" after the election as the price for the ceiling increase, but somehow he is nevertheless depicted as some hapless whining loser who does not know simple things that some Senatorial Chief of Staff knows.

Needless to say, Woodward is not an economist and specializes in these sorts of inside accounts from various players in big negotiations or situations who provide supposedly fascinating or devastating tidbits about presidents in particular, but in this case he seems to really miss several points about this, quite aside from trying to make Obama look stupid for insisting on his point about not wanting to have a second argument over this before the election, something that at this point looks to have been a very wise thing to insist on, given that the GOPsters are blaming him for all those public sector jobs being lost when they blocked his request last year to provide funds to state and local governments that would have largely stopped those layoffs from occurring. The main point is that Woodward does not seem to understand how ridiculous the whole debate was to begin with.

This gets back to something I have pounded on here repeatedly: the US is the only nation in history to have had a nominal debt ceiling. It should be abolished. We passed it in 1917 in the wake of the adoption of the income tax, and it has been raised over 70 times since with never anything more than a staged and nominal fuss, with everybody always knowing that it needed to be raised, given that Congress had passed a budget accepted by the president that entailed violating it. So, there was always a constitutional conundrum that if a debt ceiling was smacked into of either violating the ceiling or violating the authority of Congress and the president to tax and spend as they voted and signed to do. The thing has always been ridiculous and probably unconstitutional (14th Amendments says government must pay proper bills it owes). Even conservative observers have noted this since the 80s, such as Bruce Bartlett.

Woodward never mentions this issue, although there was much public discussion of it during the debate, with even Bill Clinton calling for Obama to simply declare the debt ceiling unconstitutional and proceed forward accepting whatever the judgment of the markets that happened, which quite likely would not have amounted to much. There might have been a downgrade, but there was anyway due to the Republicans threatening to hold up raising the ceiling and triggering an outright default (with markets blithely ignoring that anyway, some US government securities rates going so low as to become negative in some cases recently).

What is depressing in the story, aside from such stupidities as the reporting of this whiner Krone lecturing Obama about not having a Plan B to back up his hard work on the worthless Plan A, is that there seems to have been no discussion at all by the insiders of this option to declare the ceiling unconstitutonal. The heavyweight seems to have been Treasury Secretary Geithner, who pressured Obama to sign the Plan A if it passed Congress in order to avoid a default. Woodward pompously quotes Geithner as saying this was a moral issue as well as just being a political and economic one, but if Geithner thought that, he should have taken seriously the option of declaring (with good reason) the ceiling unconstitutional. Clearly he did not view that as an option, but why he did not is not reported in this account by Woodward.

So, as this will come up again, I think Obama and whomever he replaces Geithner with, assuming he is reelected, will seriously reconsider the constitutional option. Obama himself is reported as having provided crucial arguments for doing so, that the political opposition has become so irresponsible that they are willing to play blackmail for their demands by threatening to engineer an actual default. This irresponsibility must be confronted fully and brought to an end. Only declaring and enforcing the abolition of the debt ceiling on constitutional grounds will achieve this, which almost certainly would involve an eventual trip to SCOTUS.

BTW, I hope the rest of Woodward's book is not as biased and stupid as this selection put into WaPo today, but I suspect it will be.